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MBR - Mock Exam

The document is a mock exam for the module 'Money, Banking and Risk' with a duration of 2 hours. It consists of four questions covering topics such as budget deficits, stock performance calculations, risk management, and the distinction between systemic and idiosyncratic risk. Each question includes sub-questions that require explanations, calculations, and comparisons related to financial concepts.

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Thùy Dương
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13 views2 pages

MBR - Mock Exam

The document is a mock exam for the module 'Money, Banking and Risk' with a duration of 2 hours. It consists of four questions covering topics such as budget deficits, stock performance calculations, risk management, and the distinction between systemic and idiosyncratic risk. Each question includes sub-questions that require explanations, calculations, and comparisons related to financial concepts.

Uploaded by

Thùy Dương
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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MOCK EXAM

Module Title: Money, Banking and Risk


Module Number: BAC5013
Examination Duration: 2 hour

ANSWER ALL OF THE FOLLOWING QUESTIONS


Question 1
(a) Explain why budget deficits can be an important source of inflationary monetary policy
and then hyperinflations?
(15 marks)
(b) Explain how the changes in foreign interest rate can affect the equilibrium exchange
rate? Using supply and demand analysis to support your answers.
(10 marks)
Total: 25 marks

Question 2
(a) Calculate the standard deviation of the stock that has the price performance as
following:
Year Price
2010 $19
2009 $22
2008 $24
2007 $20
2006 $21
2005 $25
(15 marks)
(b) Calculate the average rate of return of the stock with following information
Year Beginning of year Price Dividend
2010 $19 $2
2009 $22 $2
2008 $24 $2
2007 $20 $2
2006 $21 $2
(10 marks)
Total: 25 marks

Question 3
(a) Compare risk management and risk measurement. Clarify the main objectives of risk
management.
(10 marks)
(b) Consider two assets: Apple stock and Samsung stock. Apple stock either provides a
rate of return of 15% or -4%, with equal probability. Samsung stock either provides a
return of 11% or 3%, with equal probability. You decide to hold a portfolio by investing
1/3 of your money in Apple stock and 2/3 in Samsung stock. Calculate the expected
return and standard deviation of stock Apple and Samsung. The correlation coefficient
of the portfolio is 0.5.
(15 marks)
Total: 25 marks

Question 4
(a) Distinguish between systemic and idiosyncratic risk. Give examples for each type of
risk.
(10 marks)
(b) Consider two assets: Pepsi stock and Unilever stock. Pepsi stock either provides a rate
of return of 25% or -4%, with equal probability. Unilever stock either provides a return
of 20% or 5%, with equal probability. You decide to hold a portfolio by investing 1/3 of
your money in Pepsi stock and 2/3 in Unilever stock. If Stock Pepsi and Stock Unilever’s
returns are independent of each other, what will be the expected return and standard
deviation of each stock and your portfolio?
(15 marks)
Total: 25 marks

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